Essentials of valid contract

   

1. Offer and Acceptance

Offer is proposal make by either party to the contract (offeror), to do or not to do some thing and Acceptance is assent of the offeree (To whom offer is made) to the term of the offer. There must be two parties to an agreement that means one party makes an offer and another accept it.

There must be consensus ad idem (Meeting of mind) for valid offer and acceptance. If somebody offers in one way and other party accept in another way that is not acceptance. Moreover the terms of offer must be definite and acceptance should also be absolute.

2. Intention to create legal relationship

The contract must have the element of intention to create legal relationship to be a valid contract. It is the conclusive test of the valid contract. Both the parties to the contract must have the intention to create legal relationship for making valid contract. Generally domestic and social affair lacks the intention to create legal relationship. But all the business transaction does have.

In the case of Balfour v.Balfour 1919 K.B 571 the English court of law held "the agreement between husband and wife is totally a domestic nature and not a contract".

Similarly in the case of Spellman v. Spellman (1961)2AER 498 English court of law also upheld the former decision and held "agreement of domestic nature doesn’t create legal obligation to the parties and it is not a contract."

Thus to be a valid contract there should be element of intention to create legal relationship.

3. Lawful consideration

Generally consideration implies "something in return." It equally implies the concept of "something for something." In Latin term it is said as a Quid Pro Quo. That means if one party to the contract has given something to another then he has right to get something from another party. E.g. Ram and Shyam enter into a contract for sell and purchase of Motorbike; here money and bike for each other are the consideration.

Consideration must be lawful and those contracts that have unlawful consideration are void contract as per the section 13 of NCA 2056. Here unlawful consideration means consideration that are prohibited by law like consideration in the form of weapon, drugs etc.

4. Competent Parties

The parties to the contract must be capable of entering into the contract. Contract made by the parties those are incapable in the eye of law is void as per the section 13 of NCA 2056. 

According to section 3 of the NCA 2056 any person other than mention below is eligible to make a contract.

1. Those who have not complete 16 years of age
2. Those who are of unsound mind
3. Person who is declare incapable by other laws

Generally above mention person cannot make the contract and contract made by them is not valid and it is void as per the section 13 of NCA 2056

However if any specific law made them as capable of doing contract then contract made by them is also valid one.

Moreover contract done by the guardian of above mention person except C category for the benefit of them then the contract is valid.

5. Free consent

The free consent is also an important essential to be a valid contract. Consent is said to free if there is absence of fraud, misrepresentation, mistake, coercion and undue influence.

Contract done without free consent is voidable as per the section 14 of NCA2056, and the aggrieved party can make contract void by lodging case in court of law.

E.g. Ram and Kailash enter into the contract for sell and purchase of 5 ropani land and Kailash is going to sell 5 ropani lands to Ram because Ram has told him otherwise he will kill him. This contract is voidable because Kailash didn’t have given free consent rather in coercion.

6. Legal Objective

The objective of contract should be legal for validity of contract. Whenever parties enter into the contract the purpose and object should be valid one.

Objective of contract is said to be lawful if

1. it is permitted by law
2. it is not forbidden by law

If the contract have illegal objective then it is not valid contract and is a void contract as per the section 13 of NCA 2056.

E.g. Contract for killing, Contract for carrying a business of prostitution.

7. Certain Meaning

Contract should have certain meaning and it should not have any confusion and ambiguity in obligation to the parties. Even the court of law doesn’t recognize the contract that has uncertain meaning. Thus the contract should have certain and definite meaning.

Ram accepts to sell Hari "hundred tons of oil". There is nothing whatever to show, what kind of oil is intended. It may be kerosene, sunflower and mustard. This is not a valid contract.

8. Possible to perform

Contract is the private law created by the parties for themselves. Thus it should be possible to perform. Contract that cannot perform is void and doesn’t create any legal obligation to the party. Like, contract on selling Bike which is not in the name of party.

9. Legal formalities

Generally court of law recognize both Oral and Written contract. But if there is specific law that requires the contract should have written or register then to create a valid contract, those legal formalities should be followed. E.g. Section 25 of NCA, Bailment above 5000 should be written.